How To Price Food Menu Items With A Strategy To Increase Profit

There are several key steps to price food menu items with a strategy to increase profit. The sales of menu items are a restaurant’s only source of income. Pricing a menu strategically is the best way to create a sustainable restaurant model. As a restaurant owner, you should be well-equipped to price a menu properly to maximize profits. A conscious approach to menu pricing can be the difference between surviving and thriving. Read on to learn how to price food menu items with a strategy to increase profit.

Create Reasonable Goals For Profit

To begin, create reasonable profit goals as you plan your strategy for menu food pricing. Your prices depend on reasonable goals. Profit  goals  set too high drive customers away with lofty expenses. Profit goals set too low leave money for your restaurant on the table and exacerbate prep time and labor cost issues. Without a reasonable measure of success, pricing decisions are difficult. Carefully formulated goals keep your pricing process simple. Refer to your goals as you price your menu. Surely, consciously establish reasonable profit goals as you plan your food menu item strategy.

Evaluate Your Current Costs

Second, evaluate your current costs to price food menu items with a strategy to increase profit. Calculate your costs of goods sold with a simple formula, this will improve your estimates upon your business. Use your beginning inventory plus purchased inventory sub ending inventory over a month. Add your monthly labor costs to this figure to find your restaurant’s prime cost. This rate is the total of your expenses that you have control over from day-to-day. When pricing your menu to increase profit, keep in mind that you can get a low food cost percentage by increasing prices or lowering these controllable startup costs for business. Find inefficiencies in these places before pricing food menu items. Definitely, evaluate your current costs when you develop your strategy to price menu items and increase profit.

Use Food Cost Percentage To Estimate Final Prices

Next, use a food cost percentage formula to estimate the final prices of your food menu items to increase profit. Your food cost percentage is your cost of goods sold divided by your sales over the same period. Most restaurants operate with 25%-35% food cost percentage. If your food cost percentage is currently over 35% and you have optimized your monthly inventory process, it is a good indicator you should raise your menu prices. After you determine your current food cost percentage, use your profit goals to determine a goal for an ideal food price percentage. Find the total cost of a particular food menu item’s raw ingredients. Divide this cost by the desired food cost percentage to find an estimate for a final price. If you get an odd number like $7.23 round up to $7.50. In short, use food cost percentage formula to estimate the food menu item prices and increase profit.

Categorize Your Menu Items Using A Matrix

To continue, categorize your menu items using a matrix to price your food menu items appropriately and increase profit. Place the food menu items that are high in popularity and profit as “Stars”. “Plowhorses” are your menu items that are high in popularity, but low in profit. “Puzzles” are low in popularity, but high in profit. “Dogs” are items both low in popularity and profit. Give your stars prime placement on your menu. Consider raising prices on plowhorses past the desired food cost percentage to help carry your menu. Experiment with your puzzles to see if their price point is too high, or they need better marketing as daily specials. Your dogs should be immediately rebranded or dropped from your menu. Dogs weigh your restaurant down with wasted effort and money for prep and inventory. Of course, categorize your menu items using a matrix to determine menu pricing.

Finalize Your Menu

At this point, you are in good shape to finalize your menu to increase profit. Make a few small adjustments to your prices after considering your competition. Look towards other nearby restaurants’ price points to decide focus on raising prices or lowering costs. Depending on your restaurant, you may be able to charge a premium for the atmosphere you have to offer. Over time, your matrix may change due to demand, adjust prices accordingly. Before investing in finalized menus, try temporary versions to verify food cost percentage stays consistent after any bigger price adjustments you’ve made. All in all, finalize your menu to solidify your strategy to price food menu items for a profit increase.

There are a few steps to price food menu items with a strategy to increase profit. First, create reasonable goals for profit to guide your decisions. Then, evaluate your current costs to garner the best information for pricing. Next, use food cost percentage to estimate your final prices. Fourth, categorize your menu items using a matrix. To continue, finalize your food menu pricing with a few small adjustments. These factors affect your future profit and can also have an impact on growth. Embracing these steps, you can lower commercial costs efficiently. Follow the above steps to price food menu items with a strategy to increase profit.

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